India's Logistics Boom: A Pivotal Phase of Transformation

India's logistics market is set for significant growth, projected to reach Rs 13.4 trillion by FY28. Driven by advancements, policy changes, and infrastructure investments, the market aims to reduce logistics costs to align with global standards. Key sectors like rail, road, and express logistics are poised for expansion.

The logistics sector in India, currently valued at Rs 9 trillion, is on the cusp of a transformative growth phase, according to a report by Motilal Oswal. By FY28, the market is projected to swell to Rs 13.4 trillion, marking a compounded annual growth rate of 8-9%.

This robust expansion is attributed to a combination of structural shifts, technological innovations, and government efforts focused on reducing logistics costs and boosting infrastructure. The National Logistics Policy, introduced in September 2022, aims to optimize the logistics landscape.

A key goal is enhancing the railways' role in freight movement, currently at 18%, through dedicated freight corridors (DFCs). With these DFCs nearing completion, rail freight efficiency is expected to rise. Additionally, the government's port privatisation initiatives have enhanced Indian ports' capacity, aiding operators like Adani Ports and JSW Infrastructure.

Currently, logistics costs account for 14% of India's GDP, in contrast to the 8-9% seen in developed countries. This discrepancy is largely due to the predominance of road transport, which handles 71% of freight movement. To combat inefficiencies, the government has pursued measures such as the GST and invested heavily in road and waterway infrastructures.

The domestic express logistics sector is expected to grow rapidly, with a 14% CAGR from FY23-28, driven by the burgeoning e-commerce scene. Major players, who control the lion's share of this market, are likely to strengthen their positions. The less-than-truckload segment also anticipates growth, driven by demand for smaller, more frequent deliveries.

(With inputs from agencies.)